From this Saturday's The Journal Editorial Report on Fox, the panel from Uncle Rupert's Wall Street Journal really doesn't like the idea of several counties in California using "eminent domain to seize underwater mortgages from investors and
From this Saturday's The Journal Editorial Report on Fox, the panel from Uncle Rupert's Wall Street Journal really doesn't like the idea of several counties in California using "eminent domain to seize underwater mortgages from investors and restructure them to help borrowers keep the homes." Funny, I don't ever recall anyone on Fox complaining about the use of eminent domain by people like George W. Bush so he could build his stadium in Texas, but if it's to help underwater home owners, well, that's just terrible.
A plan by San Bernardino County to seize mortgages and restructure them for underwater homeowners using eminent domain is perhaps the most aggressive example of how local governments are seeking new ways to combat foreclosure.
The cities of Ontario and Fontana are partnering with the county to create a Homeownership Protection Program that would use private funds to acquire underwater mortgages from investors. The county and the two cities have created a joint authority to explore and possibly enact the plan, and the first public meeting of that authority will be held next week.
David Wert, a spokesman for the county, said the program is worth exploring because it could offer a solution to one of the region's most entrenched problems: the vast number of loans that are stuck underwater, with more money owed than the property is worth. If the program were to go countywide, it could benefit 20,000 to 30,000 homeowners, he said.
"The only thing we are doing at this point is conducting a conversation," Wert said. "But the reason the county is interested in talking about this is because this is a proposal that could — if everything checks out — address the problem on a fairly large scale."
Although still in its initial stages, the aggressive proposal has attracted controversy. A number of banking, financial and business groups oppose it, contending that seizing mortgages would raise constitutional issues and could increase lending costs in those cities.
The California Mortgage Bankers Assn., the American Bankers Assn. and the American Securitziation Forum, along with several other financial groups, sent a letter of opposition to the county and the two cities.
"We believe that the contemplated use of eminent domain raises very serious legal and constitutional issues," the letter read. "It would also be immensely destructive to U.S. mortgage markets by undermining the sanctity of the contractual relationship between a borrower and creditor, and similarly undermining existing securitization transactions."
Dustin Hobbs, a spokesman for the California Mortgage Bankers Assn., said the program also could hurt the local housing market.
"It could be devastating," Hobbs said. "If investors are unsure as to the disposition of mortgages in San Bernardino County and in Fontana and Ontario, it could really curtail lending in the area, and if not curtail, certainly increase costs for new loans."
San Bernardino County's plan is the latest of several measures by local governments to fight foreclosures and the problems often associated with resulting neglect: crime and blight. Read on...